Fiscal Cliff Edge

12.07.12

Robert Shrum: Obama Won Election & Will Win Again on Fiscal Cliff

The fiscal cliff fight can play out in different ways—but in any scenario, the Bush tax rates for the rich are gone. Obama may make some concessions to the GOP, but he’ll end up victorious, just as he did in November, says Robert Shrum.

He’s abruptly resigned to take over the right-wing Heritage Foundation think tank. But on his way out the door, the presiding prelate of the Tea Party in the Senate, South Carolina’s Jim DeMint, anathematized House Speaker John Boehner for the secular sin of offering a Republican proposal to raise revenue by closing loopholes and limiting deductions. As heresies go, it’s not much. Boehner has brewed a warmed-over Mitt Romney plan while omitting the noxious idea of voucherizing Medicare. Never fear, through: the speaker seeks big cuts in Medicare and Social Security benefits, proving again that something at the heart of the Republican Party yearns to shred the social safety net.

In the Kabuki theater now being performed on the fiscal cliff, DeMint is irrelevant—and so are Boehner and the primary-paranoid GOP Senate Leader Mitch McConnell—on the central question of higher tax rates for the wealthy. It’s not just that President Obama campaigned and won on raising those rates, unlike the President Bush of 2004, who claimed a mandate to privatize Social Security, a scheme he had not dared speak of during the election. Nor is the decisive factor simply the exit polling or the post-November polling, which show 63 percent of Americans are on the president’s side here.

What matters most is that the tax increases will happen on Dec. 31, unless Obama agrees to stop them. Republicans backed themselves into this corner first with Bush’s deal to sunset his tax plan after 10 years, then with the congressional party’s 2010 “victory” in extending the tax cuts until after the election, and then with the 2011 jerry-rigged contrivance of “sequestration,” automatic reductions in domestic and defense spending at the end of this year as the price for raising the debt ceiling. The latter two moves were premonitory expressions of the GOP delusion of unskewed polls and an unrepresentative turnout, which pervaded the Romney headquarters and its attendant pundit class all the way until Ohio and the election were called—and in Karl Rove’s case, screechingly beyond that. Obama, they believed with all the fervor of a false faith, was bound to lose. And now, in the fiscal negotiations, they’re still running on the same tattered laundry ticket that took them down the road to defeat.

The deception of hiding blessings for the rich behind a tax break for the middle class, the drivel about “job creators,” the doctrinal fulminations of Grover Norquist with his pledge never, ever to vote for a tax increase—which has turned Republicans into Stepford senators and representatives—all this is a bankrupt strategy both in terms of policy and politics.

On policy, the fight can play out in different ways. But whatever the way, we will end with tax rates at the top back up to the Clinton-era “job killing” level—when the economy created 22 million new jobs. Simultaneously or soon after, the tax cuts for the middle class will be restored.

Scenario 1: GOP leaders will hold everything else hostage to comforting the comfortable and ravaging Medicare, Medicaid, and Social Security. Obama will refuse to pay the ransom. We will go off the fiscal cliff; markets will tank; the country will be as riveted as it was when Newt Gingrich closed down the government. At that point, the president will propose to renew the lower rates for 98 percent of taxpayers. Republicans can vote for this—after all, it’s a tax cut—without committing Norquisticide. And they will. For Boehner to block the bill from coming to the House floor would deface the GOP’s hallmark calling-card and likely instigate a revolt in his own ranks.

Scenario 2: the apostles of Robin Hood in reverse will recognize that they’ve lost not only the election but the argument. And they won’t want to be blamed for pushing the country off the cliff. But they still can’t bring themselves to do a realistic deal with Obama. So they will let an extension of the middle-class tax cuts, already approved by the Senate, come to the House floor. They will be instructed to vote “present” and the measure will pass solely, or almost solely, with Democratic votes. At the same time, the GOP will refuse to act on raising the debt ceiling or extending unemployment compensation. They are “seriously considering [this] Doomsday plan,” reports ABC’s Jonathan Karl.

But Doomsday for whom? Yes, the president will face a pitched battle after the New Year. But the automatic defense cuts that render Republicans and especially Sen. John McCain even more apoplectic than usual will go into effect. The economy will teeter, one foot over the cliff, while members of Congress soak up the recess sun or swoosh down the ski slopes. The spectacle could make the angry reaction to Gingrich’s government shutdown look like a national celebration.

Obama prevails on the policy now or on the politics—and then ultimately on the policy too.

The Republican columnist Bill Kristol suggests a less grudging, more expansive version of this ploy: vote for it and throw in a renewed round of payroll tax cuts and a rollback of the defense (but not the domestic) reductions mandated by the sequester. And this too technically wouldn’t be a vote for a tax hike but for tax cuts.

Scenario 3: The disarray and the political damage will only mount if the GOP turns the fiscal cliff into a full-fledged credit cliff by setting onerous conditions for a debt-ceiling increase that’s essential to the full faith and credit of the United States. The GOP demands would be the same then as they are now. And House Majority Leader Eric Cantor, perhaps sensing the danger of kicking the economic stability of the country into a protracted winter crisis, tweeted on Wednesday: “The House will not adjourn the 112th Congress until a credible solution … has been announced.” The tweet came just minutes after the House recessed for the weekend—which may be a sign of how unserious Cantor is about finishing the job even as he spins his resolve to get it done. But the timing isn’t as important as the glaring realities often ignored by a press corps too caught up in the machinations of compromise for its own sake to notice that the Republican “solutions” are decidedly unpopular—and ultimately unsustainable if the president holds his ground.

Put aside the last-ditch defense of the Bush tax rates for the few. As I’ve just argued, they’re gone, even while the GOP continues to pay them lip service. Look at the other items on the Republican wish list: “very pointed cuts in Medicare,” in the words of Tennessee Sen. Bob Corker; a near dismemberment of Medicaid; and lower cost of living increases for Social Security, a program that isn’t in near-term trouble and doesn’t contribute to the deficit but is on the chopping block of a party enthralled by its own reaction against history.

The Democracy Corps’s post-election surveys, conducted by Stan Greenberg, who got the election itself almost precisely right, show “an unbelievably clear mandate” against “major cuts” in any of these programs. A leading Republican strategist, as sensible as he is conservative, laments the “folly” of his party’s course: just when the party needs to redefine its appeal and recast its image, the GOP is branding itself as anti-Medicare and anti-Social Security. The longer that goes on, he says, the clearer it becomes and the worse it is for the Republican future. The addled calculation seems to be: why shouldn’t the Grand Old Party alienate the elderly along with young people, minorities, and women? The GOP is in a hole, and its congressional leadership just keeps digging.

So do the commentators for whom Republican-like cuts are the litmus tests of fiscal responsibility. But there is a rational, fair, and politically viable basis for agreement—the president’s proposals so cavalierly dismissed by Boehner and McConnell, who at least have to put up a show of resistance to placate their own caucuses or fend off primary challenges. For example, Obama has called for hundreds of billions of dollars in savings in Medicare, with a modest increase in premiums for higher-income seniors but virtually no other benefit cuts. Instead there would be reforms that reduce payments to providers and to pharmaceutical companies for prescription drugs. Such changes will generate $400 billion in savings in 10 years.

To let Republicans save face, Obama may make more concessions, but not at the heart of the matter. One he shouldn’t, and I hope, won’t, accept is raising the eligibility age for Medicare from 65 to 67. That would “save” only $113 billion over a decade. And “save” belongs in quote marks because it would be more expensive to dispatch orphaned seniors into Obamacare, which unfortunately is not a lower-cost single-payer system.

For the sake of a deal, the president also will compromise on the tax treatment for dividends and capital gains. The impact of higher marginal rates here is and always has been in dispute, but the business and financial community contends that a steep jump now would roil the markets. And business interests care more about this than a top income tax of 39 percent. They perennially finance Republican candidates, and they can be a powerful force in lobbying their political payees to come to their senses—and to a sensible settlement that reflects the unequivocal verdict of the 2012 contest.

Finally, Democrats can give the GOP what it covets on Pentagon spending. The president and his national security team not only are willing but anxious to undo the automatic decimation of the defense budget scheduled under present law.

Here, then, is the bottom line: Obama prevails on the policy now or on the politics—and then ultimately on the policy too.

The Republicans would be wise to heed advice from an unlikely source, House Democratic Leader Nancy Pelosi. “There is no time to waste”—for them or for the economy. Instead they continue digging with the fervor of true believers. They could increasingly, indelibly come across as defenders of the privileged, destroyers of Medicare and Social Security, enemies of mortgage relief, cold partisans of leaving the unemployed without help or hope, and slashers of everything from college aid to the environment—which are among the endeavors they have targeted across the board.

There are signs they may choose the ideological route. Shamefully, Senate Republicans mustered enough votes this week to block a new international treaty on disability rights, which would simply have applied American standards to the rest of the world. They followed the benighted lead of Rick Santorum. As Senate Majority Leader Harry Reid said, “[E]xtreme elements of the Republican Party picked a fight where there was nothing to fight about.” They repudiated Bob Dole, who came to the Senate floor in a wheelchair as a powerful symbolic argument for ratification. This is a party still lost in the Tea-infested swamps of mania about the sinister threat of the United Nations.

And if this remains the GOP mind-set, Reid continued, it will be “difficult to engage in rational negotiations when one side” disdains “facts and proven truths.” If so, take out your parachutes and prepare to go midair off the fiscal cliff.

But in the final analysis, the extreme cannot hold. The party of business will not be able to withstand the pressure if it craters both government and the nation’s credit rating—and the business of America. Former Michigan senator John Engler, a Republican who now leads the Business Roundtable, has argued that the debt limit should be raised enough so that the issue is off the table for four or five years. He’s been met with predictable denunciations from the far right, and his recommendation may be a step too far. But the direction here is inevitable, even if it passes through crisis and market collapse.

Indeed, the outcome is as plain as the prospects of an Obama victory in November were even as Republicans and much of the media flogged a close outcome and a Romney surge. Elections matter. Obama won—and Obama will win again.